Tesla Motors Inc (TSLA) CEO: Sales in China could match U.S. next year, plans to build factory there

Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk said that the sales of the Tesla Model S electric vehicle in China could match the U.S. levels as early as next year, according to Bloomberg. This means that Tesla would eventually have to build local plants there.

Tesla Motors Inc (NASDAQ:TSLA) announced yesterday that the Model S will cost 734,000 yuan (about $121,280) in China when the deliveries start. Elon Musk will be traveling to China in late March to inaugurate Tesla’s entry to the market there.

“It could be as big as the U.S. market, maybe bigger. I don’t want to get overexcited about it,” said Musk in an interview. “Even without building there locally, it’s always going to be the second-biggest market after the U.S.” He said that if all goes well, Model S shipments to China could match the U.S. sales by 2015.

“It’s not my firm prediction — it’s more like a low-fidelity guess,” he added.

The Tesla Model S being shipped to China has the premium 85 kilowatt hour battery pack. This same vehicle costs $81,070 in the U.S. However, Tesla has to account for $3,600 in shipping and handling, $19,000 in custom duties and taxes, and a $17,700 VAT fee for the price to hit 734,000 yuan (around $121,280).

Tesla could have sought a much larger profit by demanding more than the costs associated with the exporting of the vehicle. For example, Tesla could have charged over $160,000 for the vehicle if they followed standard industry practices. But Musk did not want to rip off customers.

“They’re basically calling us huge idiots for not ripping off customers in China.” added Musk. “I don’t think ripping off customers is a good long-term strategy.”

Musk said that getting approval in China to sell the Model S there was one of the toughest challenges that the company has faced to date. “They were the most rigorous of any in the world,” Musk added. Government officials inspected the safety issues of the vehicle and even looked at the leather used in the Model S seats.